Analysis: Heads will roll in the face of wholesale culture change

By BILL JAMIESON
Published on 29/06/2012 01:27

ON THE Richter scale of condemnation, the storm over the behaviour of Barclays has broken recent corporate records – even for banks.

The plunge yesterday – 15.5 per cent fall to 165.6p – will almost certainly have stung the bank’s institutional shareholders to demand an early statement from the board and to seek immediate assurances that the rotten culture exposed by the Financial Services Authority (FSA) probe at the heart of the bank really has changed.

And yesterday’s fall may not be the end of it as class action suits against Barclays are now under way in America that could result in settlements dwarfing the £290 million fine imposed by the FSA.

The condemnation of the bank’s behaviour exposed by the report – seeking to manipulate the internationally used London Inter-Bank Offered Rate – is without modern precedent in intensity and scope. It is hard to see how chief executive Bob Diamond can survive as chief executive. But if his head is on the block, what of others? A wholesale culture change at the bank that the investment institutions will now clamour to see may well require the departure of current chairman Marcus Agius – one of the biggest names in the UK financial sector.

Other senior directors who said on Wednesday they would waive their bonuses – Jerry del Missier, chief operating officer; Rich Ricci, the head of the investment banking operations; and Chris Lucas, the bank’s finance director, may all face demands to follow suit if Diamond goes. And what of John Varley, the previous chief executive who was in situ during the period covered by the FSA report? How might he and others be called to account?

The first priority must be an independent and thorough inquiry, not only into the breakdown in governance exposed by the FSA but crucially also into what particular and specific steps the bank has taken to change the culture.

This colossal failure of culture will require a wholly new governance system within the bank – not just a change of personnel.

The FSA report has the potential to turn the “shareholder spring” into a searing summer conflagration, catalysing more change at Barclays and other banks than anything we have seen to date.